Welcome to the November 2025 edition of the Freshfields FS Insights newsletter, which contains a selection of thought leadership related to the financial services industry published over the past month by Freshfields lawyers from around the world.

Artificial intelligence

Navigating the New Regulatory Momentum: AI in UK Financial Services

Artificial intelligence (AI) is already reshaping financial services, but regulators are moving fast to ensure opportunity does not outpace risk. Recent developments from the Financial Conduct Authority (FCA) and the UK Parliament’s Treasury Committee suggest that safe, transparent, accountable deployment of AI is rapidly becoming not just best practice, but a regulatory expectation. Both the Bank of England and the FCA adopt a technology-agnostic approach to supervision, meaning they neither prescribe nor prohibit the use of particular technologies.

In its 2024 AI Update, the FCA confirmed that its outcomes-focused approach to regulation and supervision applies equally to AI. This means the FCA is relying on existing regulatory and legislative frameworks to mitigate many of the risks associated with the use of AI in UK financial services and markets. The FCA sees this as regulation that enables innovation. By focusing on outcomes rather than rigid rules, the FCA allows firms some flexibility in how they adopt new technologies like AI, while still holding them accountable for fair treatment of customers and resilient operation.

For more information, see our blog post.

Innovation

Regulating for innovation: the Bank of England’s emerging technology blueprint for the UK financial system

On 15 October 2025, the Bank of England (BoE) published a comprehensive paper outlining its approach to innovation in AI, distributed ledger technology (DLT) and quantum computing. The BoE identified these as the three technologies with the greatest current potential to shape the UK economy and the future of financial services.

In the paper, the BoE positions itself as an active participant in this technological transformation. The paper details the BoE’s ongoing work and its plans to guide the responsible adoption of these technologies, recognising their potential to boost UK productivity and economic growth whilst flagging the importance of managing the associated financial stability risks. Ultimately, the BoE’s objective is to harness the benefits of innovation to support its objectives of monetary and financial stability and the long-term competitiveness of the UK financial system.
 
Our blog post highlights four key takeaways from the BoE’s publication.

Fund tokenisation

Tokenising the future: FCA consults on progressing fund tokenisation

On 14 October 2025, the FCA published a consultation paper (CP25/28) setting out its proposals to facilitate the adoption of tokenisation by the asset management industry in the UK. The proposals apply to managers and depositories of authorised funds, but some of the proposals will be of interest to fund and asset managers more broadly, including managers of non-authorised funds.

The proposals align with the FCA’s broader digital assets agenda, as set out in their Crypto Roadmap, which we explored in a previous blog post. The consultation specifically sets out guidance for:

• operating a tokenised fund under the Blueprint model;
• a streamlined ‘direct to fund’ (D2F) dealing model; and
• a roadmap for future regulatory evolution.

For more information on CP25/28, see our blog post, or for a detailed review of the FCA’s proposals, see our briefing.

Cryptoassets

The challenges of bringing cryptoassets within the UK regulatory perimeter

The UK government has finally published a detailed draft statutory instrument and accompanying policy note, which provide long-awaited additional clarity on the shape of the regulatory regime for cryptoassets in the UK. The FCA has also recently closed for consultation a discussion paper seeking views on its approach to regulating various types of cryptoasset activity, with a further consultation to follow if parts of the paper are progressed. These efforts fit within the wider FCA Crypto Roadmap that charts the course for cryptoasset regulation in forthcoming years.

However, and perhaps inevitably, there is uncertainty in implementation and divergence of opinion on aspects of the reform. With these developments, we will see a wholesale change in the regulatory landscape for cryptoassets in the UK. This will have significant consequences for all businesses engaging, or seeking to engage, in activities involving cryptoassets.

More broadly, the new regime may help to ameliorate the potential for fraud in this area, as well as enhance safeguards to ensure better consumer protection and provide clarity to businesses carrying on activity in this space. Nonetheless, it needs to be balanced against stifling innovation and investment.

The reforms may also result in changes in the type of cryptoasset litigation we have seen reach the courts to date, with a move away from the enforcement, disclosure and injunction cases to trace and recover cryptoassets arising from fraud, towards decisions related to the new regulatory framework and delineating the rights and obligations that may attach to cryptoassets.

In an article published in the October 2025 issue of the Butterworths Journal of International Banking and Financial Law, Claire Harrop, Cyrus Pocha, Emma Probyn, Tom Clark and Laura Feldman from our London Financial Services Regulatory and Disputes teams explore the proposals to bring cryptoassets within the regulatory perimeter, summarise the current and new regimes and assess some of the challenges that may materialise.

Digital

The EU’s proposed Digital Fairness Act: A content creator’s guide to potential implications

The European Commission’s consultation on the content of its new Digital Fairness Act (DFA) closed on 24 October 2025. The DFA proposal - expected in the last quarter of 2026 - may seek to regulate what creators can promote and how it is presented on social media. The Commission wants the DFA to address “harmful practices by social media influencers”. The ideas they are considering could significantly reshape the creator economy. 

Our blog post examines the DFA’s potential impact on social media creators, influencers, digital storytellers – the lifeblood of social media commerce. It is the first in a short series unpacking what the DFA could mean for different stakeholders across the digital ecosystem.

Targeted support

Shaping the regulatory landscape for targeted support: FCA consults on consequential Handbook changes to support the new regime

On 26 September 2025, the FCA published a consultation paper (CP25/26) setting out additional changes to its Handbook to further integrate the new regime for targeted support into the existing regulatory landscape. This follows an earlier FCA consultation on detailed proposals for targeted support for pensions and retail investments (CP25/17), which we initially reported on here and discussed in further detail in a related briefing. In this blog post, we provide a high-level breakdown of a number of key changes proposed in CP25/26 and highlight certain areas firms should consider when implementing the necessary adjustments to their businesses.

Payments

Tackling authorised push payment (APP) fraud: a challenging and evolving payments environment

The UK Payment Systems Regulator (PSR) has introduced significant changes to the UK payments landscape. The recently introduced mandatory reimbursement regime allows victims of “authorised push payment” (APP) fraud to reclaim fraudulently transferred funds from the sending payment system provider (PSP) that processed the payment unless certain limited defenses apply. This novel scheme, which is unique globally, aims to redistribute the burden for fraud between PSPs and consumers, encourage PSPs to introduce greater measures to tackle fraud, and curtail disputes in this area. In September 2025, Piers Reynolds and Laura Feldman published an article in the inaugural edition of the Journal of Financial Services on developments with the Scheme, in which they assess its operation to date, explore potential difficulties, and conclude with practical guidance for PSPs managing the new measures.

Remuneration

PRA and FCA announce changes to banker bonuses

In November 2024, the PRA and FCA published a joint consultation proposing changes to the current senior banker remuneration regime for dual-regulated firms. On 15 October 2025, the regulators confirmed their plans to increase flexibility around senior banker pay, alongside changes to create better links between bonus awards and responsible risk-taking. Overall, the joint policy statement adopts the main direction of last year’s proposals but does include some changes that go beyond the original consultation.

The new rules present a clear opportunity for financial services firms to strategically reset their remuneration frameworks to be simpler, more competitive, and better aligned with their risk appetite. As a starting point, firms should decide whether to adopt any of the new flexibility for the current performance year and for unvested awards from prior years, and then move on to reviewing and optimising their remuneration structures for future performance years. Internal policies and procedures may need to be updated to reflect these changes.

For more information, see our blog post, in which we outline some of the more significant changes.

Financial crime and sanctions

OFSI Publishes Annual Review 2024-25

On 15 October 2025, the Office of Financial Sanctions Implementation (OFSI) published, alongside guidance on who is subject to financial sanctions in the UK, its Annual Review for 2024-25, outlining key developments in its approach. Detailing efforts to improve compliance and strengthen enforcement, the annual review:

• Follows OFSI’s financial services sector threat assessment (see our previous blog post).
• Follows its recently closed public consultation on improving civil enforcement processes for financial sanctions. The consultation sought views on proposals to (among other points) change OFSI’s public case assessment guidance and penalty discounts for voluntary disclosure and co-operation; to introduce a settlement scheme for monetary penalty cases; to introduce indicative penalties for appropriate cases involving information, reporting, and licensing offences; and to amend OFSI’s statutory penalty maximums. 
• Continues to emphasise its continued focus on a more proactive regulatory approach.

Overall, the annual review clearly demonstrates OFSI’s developing processes and enforcement focus. Its published penalties have clearly increased in frequency this year, often focusing on themes of inadequate understanding of sanctions; errors in implementing sanctions; inadequate systems and controls; and reporting issues. Both penalty quantity and quantum are doubtless likely to continue to increase.

For more information, see our blog post.

Consumer Duty

FCA refines Consumer Duty

On 30 September 2025, the FCA released a series of important updates on the Consumer Duty:

• A letter to the Chancellor of the Exchequer, Rachel Reeves MP, on the Consumer Duty’s application to wholesale firms, outlining the FCA’s four-point action plan;
• A new webpage on the FCA’s Consumer Duty focus areas, setting out the FCA's workplan for 2025/2026; and
• A new webpage on the FCA’s Consumer Duty requirements review update, setting out the action taken by the FCA since its Call for Input in July 2024 and tracking further actions and future priorities.

Taken together, these developments signal the regulator’s intention to clarify certain aspects of the Duty and address concerns around proportionality, particularly for wholesale firms. For more information, see our blog post, or for a detailed review, see our briefing.

CEE Finance Workshop

Europe 2.0 – Competitive and Autonomous: Key Insights from the CEE Finance Workshop

On 23 October 2025, the Freshfields Vienna team welcomed legal experts and financial leaders to its Vienna office for its 17th annual CEE Finance Workshop. Under the overarching theme "Europe 2.0 – Competitive and Autonomous", the day's discussions were kicked off with a keynote from Sebastian Firlinger, CFO of Kommunalkredit Austria AG, on infrastructure's pivotal role in driving competitiveness. He emphasized innovation as the engine for economic prosperity, required for maintaining European competitiveness and autonomy, framing the core challenge as how to fuel this growth while navigating an increasingly complex regulatory environment.

The following panel discussions then explored the critical role that thoughtfully designed legal and regulatory frameworks play in building resilience and driving growth across Central and Eastern Europe. From recalibrating credit markets and delivering on regulatory promises to navigating the new insolvency playbook and financing the transition, the panels provided a comprehensive look at a region that is proactively shaping its economic future.

For more information, see our blog post.